5 ms·

> They would (probably) make up their losses through rent increases and additional service charges - effectively passing on the tax to renters and leaseholders.

> They would (probably) make up their losses through rent increases and additional service charges - effectively passing on the tax to renters and leaseholders. Since no land can be created or destroyed, the supply-demand curve is fixed. This means that the land tax cannot be passed onto the renter, because the market conditions haven't changed. The rent is not calculated based on the landlord's costs plus some extra, but instead is whatever the market equilibrium price is. Another way to think about it: if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed?

snidane 6y ago
> Another way to think about it: if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed? Exactly. Because they hold monopoly pricing power over tenants they could in theory increase the rents 10 times even today. They don't do that, because better strategy for a parasite is to maximize profit and not to kill the host.
nybble41 6y ago
> … if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed? That logic only works in a non-competitive market. The reason they don't raise rates is obvious: There are other landlords around and any one landlord raising rates would lose business to the others. If you raise costs for all landlords, however—for example, by imposing a LVT—then there is no risk of defection. Landlords either raise their rates or lose money with every rent payment. Any that don't raise their rates will go out of business to be replaced with others who do. And if you use price controls to prevent them from raising rates despite losing money then they would go out of business without being replaced, leaving individuals and businesses to buy their own property outright rather than renting, in which case they will be paying the LVT along with all the other costs formerly handled by the landlord. TL;DR: Don't assume that the market equilibrium price is fixed and independent of cost!
- snidane 6y ago
  You can't extract more rent if you charge maximum of what your customer can afford. If landlords raised rents collectively then people would simply sprawl out to suburbs. City rent is an aggregate monopoly - there is not enough supply of housing to have effect on downward pressure for rents. Demand is overwhelming supply. Landlords' rent prices are not driven by competition but determined by what the market can bear.
mrep 6y ago
If the land tax is greater than what you can make renting, then that means your land is improperly priced. You can prove it by putting it on the market and no investor will buy it at that price because they would lose money and thus it would have to fall until the land tax is less than what they can make from rent. Now, if you abolish zoning or rezone places in addition to a land value tax, it could work as the investor could build more housing for the same land thus splitting the cost over multiple renters which I'm sure is the intended affect but a land value tax won't work without changing zoning laws and at the end of the day, it's all passed onto renters.
- neilparikh 6y ago
  Wouldn't the current zoning of the land be reflected in the valuation (and thus LVT paid)? For example, why would a land zoned for SFH be valued as if a 20 story apartment could be built on it? Ie. The zoning should put a cap on the valuation.

snidane 6y ago

> Another way to think about it: if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed? Exactly. Because they hold monopoly pricing power over tenants they could in theory increase the rents 10 times even today. They don't do that, because better strategy for a parasite is to maximize profit and not to kill the host.

nybble41 6y ago

> … if landlords have the market power to raise rents, why wouldn't they just do it now, rather than wait until an LVT is passed? That logic only works in a non-competitive market. The reason they don't raise rates is obvious: There are other landlords around and any one landlord raising rates would lose business to the others. If you raise costs for all landlords, however—for example, by imposing a LVT—then there is no risk of defection. Landlords either raise their rates or lose money with every rent payment. Any that don't raise their rates will go out of business to be replaced with others who do. And if you use price controls to prevent them from raising rates despite losing money then they would go out of business without being replaced, leaving individuals and businesses to buy their own property outright rather than renting, in which case they will be paying the LVT along with all the other costs formerly handled by the landlord. TL;DR: Don't assume that the market equilibrium price is fixed and independent of cost!

snidane 6y ago
You can't extract more rent if you charge maximum of what your customer can afford. If landlords raised rents collectively then people would simply sprawl out to suburbs. City rent is an aggregate monopoly - there is not enough supply of housing to have effect on downward pressure for rents. Demand is overwhelming supply. Landlords' rent prices are not driven by competition but determined by what the market can bear.

mrep 6y ago

If the land tax is greater than what you can make renting, then that means your land is improperly priced. You can prove it by putting it on the market and no investor will buy it at that price because they would lose money and thus it would have to fall until the land tax is less than what they can make from rent. Now, if you abolish zoning or rezone places in addition to a land value tax, it could work as the investor could build more housing for the same land thus splitting the cost over multiple renters which I'm sure is the intended affect but a land value tax won't work without changing zoning laws and at the end of the day, it's all passed onto renters.

neilparikh 6y ago
Wouldn't the current zoning of the land be reflected in the valuation (and thus LVT paid)? For example, why would a land zoned for SFH be valued as if a 20 story apartment could be built on it? Ie. The zoning should put a cap on the valuation.